Keywords Studios


Market Cap-2206.5m

Last Close -2920

Keywords Studios is the largest and most diverse supplier of outsourced services to the games industry. Through regular acquisitions, it is building its scale, geographic footprint and delivery capability to become the ‘go to’ supplier across the industry.

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Investment summary

Keywords has delivered exceptional growth in H121, reflecting continued strong demand from video games developers driven by gamers desperate for new content. Expected revenues of €238m are up c 37% y-o-y, with organic growth of 23% as all service lines performed well against a weak H120 comparator (initial impact of COVID-19). Margins were also elevated, with adjusted PBT of €40m, an 80% y-o-y increase and a margin of 16.8%, continuing the uplift in margins seen in H220. With costs expected to start to normalise towards the end of the year, we have raised our FY21 adjusted PBT margin to 16%, but have left our FY22 and FY23 margins at 15%. Keywords trades on a P/E of 39.4x our updated FY21 estimates, falling to 37.1x in FY22. However, we expect that further M&A will lower Keywords’ rating.

Y/E Dec
Revenue (€m)
PBT (€m)
EPS (fd) (c)
P/E (x)
P/CF (x)
2019A 326.5 57.6 40.9 47.2 72.4 48.3
2020A 373.5 74.2 55.0 57.7 59.3 29.9
2021E 491.5 100.6 78.8 81.6 41.9 27.9
2022E 563.9 107.8 84.8 87.1 39.3 24.8
Industry outlook

Buoyed by exceptional demand for games during lockdown and boosted by the start of the console transition, the global games industry showed y-o-y growth of 20% in FY20 (Newzoo). There are signs of launch delays in 2021, particularly to larger AAA titles, but as a service provider, this may even benefit Keywords, allowing more time for bug-fixing and polishing. Newzoo is forecasting 10.5% CAGR 2019–23e as the industry returns to trend growth.

Last updated on 19/08/2021
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Share price graph
Balance sheet
Forecast net cash (€m) 91
Forecast gearing ratio (%) N/A
Price performance
Actual 14.2 17.4 31.9
Relative* 10.8 14.1 8.4
52-week high/low 2996.0p/2056.0p
*% relative to local index
Key management
Ross Graham Chairman
Joe Quinn Investor relations
Sonia Sedler COO and interim CEO